- CCI report asserts that both companies established an ecosystem where preferred sellers, bolstered by specific business arrangements, gained an upper hand in online visibility and listings.
- Confederation of All India Traders welcomes CCI’s investigation, indicating that the findings will be escalated to federal government for further action.
- Probe signals a potential shift towards enhanced protection for smaller retailers and a more equitable marketplace.
The Competition Commission of India (CCI) has concluded that American e-commerce giants Amazon and Walmart’s Flipkart have violated local competition laws by giving preference to select sellers on their shopping websites.
The CCI’s findings, detailed in extensive reports spanning 1,027 pages for Amazon and 1,696 pages for Flipkart, paint a concerning picture of entrenched practices, thereby undermining fair competition in the marketplace.
Initiated in 2020 in response to a complaint from the Delhi Vyapar Mahasangh—a prominent trade body that represents approximately 80 million retailers—the investigation sought to ascertain whether Amazon and Flipkart were engaging in anti-competitive practices.
The CCI report, as reported by Reuters, asserts that both companies established an ecosystem where preferred sellers, bolstered by specific business arrangements, gained an upper hand in online visibility and listings.
The reports concluded that ordinary sellers were relegated to the status of mere database entries, effectively marginalising them and stifling healthy competition.
Central to the CCI’s findings is the allegation that these e-commerce platforms provided preferential treatment in search result rankings, allowing a select group of sellers to dominate visibility.
Smaller retailers shunned
The prioritisation facilitated deep discounts on products, particularly mobile phones, leading to detrimental effects on smaller retailers trying to compete in a price-sensitive market.
In their analysis, the CCI highlighted that such practices not only contravene local competition laws but also contribute to a broader market dynamic that endangers the viability of numerous small businesses.
Both Amazon and Flipkart have denied any wrongdoing, asserting that their operational practices adhere to Indian law.
The companies are now reviewing the CCI reports and are expected to file objections before any potential fines are levied. Their previous denials of misconduct align with ongoing controversies in the United States, where the Federal Trade Commission (FTC) has also accused Amazon of employing anti-competitive strategies to maintain its market dominance.
Transparency needed
The parallel investigations in both countries underscore a growing scrutiny of the competitive practices of major tech companies.
The significance of the CCI’s findings extends beyond regulatory compliance; they reflect a growing discontent among traditional retailers regarding the aggressive discounting strategies employed by e-commerce platforms.
The Confederation of All India Traders (CAIT) has welcomed the CCI’s investigation, indicating that the findings will be escalated to the federal government for further action.
The grassroots support highlights the broader implications of the inquiry, suggesting that smaller retailers may seek greater protections in the face of increasingly dominant online competitors.
As India’s e-retail market, valued at approximately $57−$60 billion in 2023, is projected to soar to over $160 billion by 2028, the stakes are high for all stakeholders involved.
Amazon in June last year said it will increase its Indian investment to $26 billion by 2030, including for its cloud business. It is also targeting merchandise exports worth $20 billion from India by 2025.
The findings set forth by the CCI compel a reevaluation of how e-commerce giants operate within this burgeoning market, particularly concerning their relationships with smaller sellers.
If the CCI’s conclusions catalyse, legislative changes or lead to more stringent enforcement of competition laws, the ramifications could reshape the landscape of e-commerce in India, compelling larger players to adopt more transparent and equitable business practices.
Even though Flipkart and Amazon tried for months to block the investigation in courts, the Supreme Court allowed it to go ahead in 2021.